Tariffs or a new business model?

Tariffs or a new business model?

Last issue we talked a bit about retreading and how the Chinese are exporting their business model to the rest of the world.Double-Coin-Tyre3-@-RubbeTech-CHina-201-2

That business model relies on single-use truck tyres with no retreading or re-grooving. Despite being strong in truck tyres, India has only a small retread sector, but in some ways the country is becoming the development ground over business models for the future.

International tyre makers are convinced that their business model is the right one. Those of us in Europe and North America are proud that we make robust tyre carcasses that can run for many hundreds of thousands of kilometres using two three or even more tread packages.

For that business model to work, we rely on good, well-surfaced roads with few pot-holes and on minimal over-loading.

Those business conditions do not exist everywhere in the world. Although India’s roads are improving, and the government is trying to enforce over-loading regulations, I think most of us know that the retread sector in India is facing a difficult start and slow long-term growth.

In India, despite the best efforts of the Chinese, radialisation is still somewhere between 30 per cent and 40 per cent.

China is also different from the West. Although the roads tend to be fairly good, over-loading in China is even worse than in India. Yet radialisation of the truck sector in China is between 80 and 90 per cent (depending on whom you ask).

Despite a higher radialisation figure, there is no significant retreading in China. Tyre makers there have managed to retain control of the market to the point where they ensure that retreading is not economic.

Chinese truck tyre makers appear to analyse the situation thus: “If we allow retreading, then our market will fall by around half.”

I know that certain suppliers of steel cord in China take the same view.  More retreading means less sales.

No matter what my Western conceits might be about sustainability and resource usage, I can see their point.

By David Shaw

(Full text in PTA Dec-Jan issue)

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